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March 28, 2012 -- Wednesday morning’s arguments in the Supreme Court case on the Affordable Care Act (ACA) revolved around a seemingly hypothetical question: If the court says the individual mandate that requires individuals to obtain health insurance is illegal, what happens to the rest of the law? Should it, too, be struck down?

The question seems less hypothetical, however, after Tuesday’s two-hour hearing on the individual mandate. Although no one can predict how the court will rule, its intense questioning around the mandate led some legal experts to say that it could very well rule against it.

Attorney Paul Clement, representing the 26 state officials and the National Federation of Independent Business (NFIB) in their challenge of the health care reform law, told the justices that if the individual mandate is ruled unconstitutional, “the rest of the act cannot stand.”

“What you would end up with is a hollow shell,” Clement said. He said the court should erase the entire law and give Congress a “clean slate” for tackling health care reform.

U.S. Deputy Solicitor General Edwin Kneedler conceded that a few of the law’s key provisions would need to go if the individual mandate is found illegal. But Kneedler argued that most of the law should remain, particularly since Americans are already benefiting from some of its reforms, such as keeping young adults on their parents’ health plans up to age 26. They would lose that coverage, he warned, if the court invalidated the entire law.

Opponents of the health reform law have challenged it in more than two dozen federal lawsuits, and have lost most of them. Only once have they convinced a court to declare the entire law unconstitutional. That happened in the case that officials from 26 states and the NFIB filed in a district court in Pensacola, Fla. There, U.S. District Judge Roger Vinson said the mandate overstepped Congress’ constitutional authority to regulate commerce. And since Vinson viewed the mandate as “inextricably bound” to the rest of the law, he canned all of it.

An appeals court in Atlanta also declared the mandate unconstitutional, but said the rest of the health reform law could stand. That ruling is now under review by the Supreme Court, which will settle the matter once and for all.

Government Says Most of Law Does Not Affect States, NFIB

To convince the high court that the mandate and the law are “inextricably bound,” Clement today cited the government’s own argument that the law’s dramatic health insurance reforms hinge on everyone obtaining coverage. Without the mandate, the government contends, it would be counterproductive to require private health insurance companies to guarantee coverage to everyone.

The reason? Healthy Americans could wait until they were seriously ill before they applied for insurance, leaving private insurers in the meantime with a risk pool of sick and expensive individuals. This would force insurers to raise premiums to unaffordable levels, according to the government.

In response, Kneedler said today that the state officials and the NFIB are not impacted by most of the law’s provisions and therefore lack a good reason to get rid of all of it. Kneedler disagreed that Congress viewed the law as an all-or-nothing proposition. If the court declares the mandate unconstitutional, Kneedler said, it should only abolish guaranteed coverage, not the entire law.

‘Friend of Court’ Says Reforms Could Work Minus Mandate

Stepping into the legal ring today with the Obama administration and challengers to the law was attorney H. Bartow Farr III. The court appointed Farr as a “friend of the court” to argue that the rest of the law could stand if the mandate does not.

Invalidating the entire law, Farr said today, “is an example of the best driving out the good.”

Even without the mandate, the law “would still open the insurance market to millions of people and lower premiums for millions,” said Farr.

Medicaid Arguments

The court also listened to arguments about the law's stance on expanding Medicaid at the state level.

Although administered by the states, Medicaid is funded with both state and federal dollars, with Uncle Sam kicking in about two-thirds of the total. Clement said today that the federal government is using the states’ dependence on those federal dollars to coerce them into Medicaid expansion, with little controls over what benefits they offer.

The dollar figures at issue are enormous. Through 2016, the federal government will underwrite the entire cost of caring for Medicaid recipients who enter the program through the new eligibility requirements. The federal contribution will gradually decrease until it reaches 90% in 2020. In all, the states will receive an additional $434 billion in federal Medicaid dollars during that time.

The state officials complain that Medicaid expansion will nevertheless require them to spend at least an additional $20 billion of their own money on Medicaid, which is already a budget buster for them. Plus, they will have less control over what benefits they offer.

Justice Ruth Bader Ginsburg noted that although officials from 26 states have objected to Medicaid expansion, officials from other states welcome it.

“You are saying that because you represent a sizeable number of states, you can destroy this whole program, even though there may be as many states that want it, that don't feel coerced,” Ginsburg told Clement.